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Facts
The assessee purchased agricultural land, with the sale deed indicating payments made in cash installments between 1990 and 2012. The Assessing Officer (AO) made additions for unexplained cash deposit and unexplained cash credit under section 68 for Rs. 13,60,500 and Rs. 62,97,975 respectively, related to the property purchase.
Held
The Tribunal held that Section 68 is not applicable as there was no credit entry in the assessee's books of account for the addition. The sale deed clearly mentioned payments made over a period from 1990 to 2012, which the AO failed to consider. Therefore, the addition made by the AO was not justifiable.
Key Issues
Applicability of Section 68 for unexplained cash credit in property purchase where sale deed indicates payment over past years, and correct rate of taxation under Section 115BBE.
Sections Cited
68, 115BBE, 56(2)(vii)(c), 50C, 69, 69B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SURAT “DB” BENCH, SURAT
Before: Dr. BRR Kumar, Hon’ble & Ms. Suchitra Kamble
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 23-02- 2024 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2017-18.
The grounds of appeal are as under:- “1. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the action of Assessing Officer in making addition of Rs.62,97,975/- on account of undisclosed income from undisclosed source invested in the property purchased by the assessee u/s.68 of the Act.
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On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the action of Assessing Officer in taxing the income u/s 115BBE @77.25% in a retroactive manner by applying the duly substituted S.115BBE inserted retrospectively instead of taxing it at 35.54% as per the old provision of S.115BBE. 3. It is therefore prayed that the above additions made by the Assessing Officer and confirmed by Ld. CIT(A), may please be deleted or any addition if sustained may please be taxed at 35.54% as per the old provisions of S.115BBE. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
The assessee derived income from brokerage and agricultural income. The assessee filed return of income declaring total income at Rs. 3,17,420/- along with agricultural income of Rs. 5,49,930/- on 23-01-2018. The case was selected for complete scrutiny for the reason that large agricultural income shown in ITR, larger cash deposit during demonetization period. The Assessing Officer observed that the assessee deposited cash of Rs. 13,60,500/- during demonetization period. The assessee purchased agricultural land during the year under consideration and the property transaction was completed on 02-09-2019. The sale consideration of the property is Rs. 1,25,95,950/- whereas the stamp duty was paid by the assessee of Rs. 6,17,250/-. The assessee filed reply and after taking cognizance of the said reply, the Assessing Officer made addition of Rs. 13,60,500/- in respect of unexplained cash deposit being unexplained income u/s. 68 of the Income Tax Act, 1961. The Assessing Officer also made addition of Rs. 62,97,975/- as unexplained cash credit u/s. 68 of the Act related to the purchase of land. 2
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The assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The ld. A.R. submitted that the assessee purchased of an agriculture land situated at Mota Varachha, R.S. No. 503, Block No.451. The property transaction was completed vide Registered document No. SRT/RDR/826/2016 dated 02.09.2016 and the sale deed is filed In the Paper Book. The Sale Deed at Pg. no. 7 states that the sale was committed in the year 1990 and the rights were transferred to the purchasers i.e. the assessee. The Sale Deed dated 02.09.2016 also makes reference to notarised Agreement to Sale cum possession executed on 01.02.2012 wherein it is mentioned at Pg. no. 3 that the sale was already committed in year 1990 and after receiving the remaining payment in cash, the seller is now accepting the sale and transfer of possession through the impugned agreement to sale. The Sale Deed also mentions that the final sale deed could not be executed at that time pending "Land Block Vibhajan" l.e. permission required from Revenue Department to legally divide the block of land into multiple smaller plots which is necessary for establishing land ownership and necessary for property management. Further, in the Sale deed dated 02.09.2016, the payment period is clearly mentioned at Pg. no. 8 of sale deed which clearly states that the "payment of Rs. 1,25,95,950/- for purchase of land was made from 1990 to 2012 in cash instalments". The English translation of the relevant extract of Pg. no. 8 of Sale Deed is filed in the Paper Book and the same is reproduced below: 3
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"The land-property in the below mentioned schedule has been sold by us ie, party of the second part by giving complete rights and authority as to the management, operation and disposal of the land-property to the parties of the first part for consideration of Rs. 1,25,95,950/- one crore twenty five lakhs ninety five thousand nine hundred and fifty only in the year 1990 and the possession was also transferred to the purchasing party. The sale consideration for the agreed amount of Rs. 1,25,95,950/- was made from 1990 to 2012 in cash installments and we are accepting the final receipt of the same. In future, there is no claim to be entertained in relating to no consideration or lower consideration by party of the second part or their successors, parents or heirs and if any such claim is made, the same shall stand void through this agreement in writing" Based on the above facts, the Assessing Officer has observed that the consideration mentioned in purchase deed is Rs. 1,25,95,950/- and the assessee buyer has 50% share and hence, the Assessing Officer invoked the provisions of Section 68 by concluding that the assessee could not explain the source of investment and made addition of Rs. 62,97,975/-(50% of Rs. 1,25,95,950/-). Hence, the primary argument of the assessee is regarding the invocation of Section 68 by Assessing Officer in regard to hypothetical payment of Rs. 62,97,975/- without any credit in the books of account or without any reference of voucher evidencing unaccounted receipts or unaccounted payments made 4
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during the year under consideration. The bare portion of Section 68 is as follows: "Where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or explanation offered by him, is not, in the opinion of the Assessing Officer satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." Thus, from the above definition, it can be culled out that, where any sum is found credited in the books maintained by the assessee for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. In the present case, it is not a case of cash deposits in bank account and infact no such amount of Rs.62,97,975/-is found credited in the books of account which is the primary condition for invocation of Section 68 and hence, it is submitted that the application of Section 68 is bad in law and liable to be quashed. Even if it is assumed that Section 69 is invoked, the essential conditions of Section 69 are as follows: The assessee has made investment in the financial year immediately preceding the assessment year.
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Also, such investments are not recorded in the books of accounts, if any, maintained by him for any source of income. Either the assessee unable to furnish explanation about the nature and source of the investments or the AO is in the opinion that the explanation offered by him is not satisfactory. If all the above conditions are satisfied, then the value of such investments 'may' be deemed to be the income of the assessee of the financial year in which he has made the investments. It is thus submitted that there cannot be any addition u/s. 69 or 69B as unexplained investment as there is no evidence as to any payment made by the assessee on any particular date falling in the year under consideration in cash to the seller and this is not the case of the Assessing Officer also, Infact, the purchase deed which is a sacrosanct document for transfer of property clearly mentions that payment for purchase is made from 1990 to 2012 and the seller has also confirmed the same by executing and signing the sale deed. In cases falling under section 69, 69A, 69B and 69C, the words used shows that before any of these sections are invoked, the condition precedent as to existence of Investment, expenditure, etc. must be conclusively established by material on record! evidence particularly as to the exact dates on which the investment/expenditure is made. As submitted above, Section 68 cannot be invoked as there is no credit entry representing the said addition of Rs. 62,97,975/- and further Section 69 or 698 also cannot be invoked as the Assessing Officer has not fulfilled the onus 6
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that lay upon him to prove the payment made with date of payment. The law is clear in as much as it states that the sum as determined under above mentioned sections would be taxable in the Financial Year in which it is credited (Section 68), invested (Section 69, 69A, 698) or incurred (Section 69C) which also shows as to why the date of payment is so very crucial. In the present case, the Assessing Officer has not fulfilled this onus upon him as he has not given any finding as to dates of payments falling in the year under consideration. Reliance is placed on the decision of Mumbai Bench in the case of Chiraayu Estate & Development (P.) Ltd. ITA No. 263/Mum/2010 dated 24.08.2011, wherein it was held that "the burden is on the revenue to show that the assessee has made an investment. Thereafter, the investment has to be related to a financial year. The course of events show that revenue has not proved that investment in the immovable property was made by the assessee. The year in which the investment was made is also not discernible from the document." Thus, the burden of proving that the income is subject to tax is on the Revenue and primarily it is the onus of the Department to first demonstrate that the assessee has made payment for investment in the financial year immediately preceding the assessment year. Reliance is placed on the decision of Gujarat High Court in the case of Ushakant N. Patel v. CIT (2006) 282 ITR 553 wherein it was held that the Section 69 begins with the phrase "where in the financial year immediately preceding the assessment year, the assessee has made investment". This confirms the responsibility of 7
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the assessing authority to demonstrate that there are unrecorded investments, and they were made during the financial year immediately preceding the assessment year. The burden then shifts to the assessee to satisfactorily explain the source. This effectively determines the year of taxability to be the year in which the investment was made. Here, the first condition itself is not fulfilled and thus the assessee cannot be expected to prove the negative. Reliance is also placed on the decision of Calcutta High Court in the case of Commissioner of Income-tax v. Sanjeev Jain [2023] 150 taxmann.com 487 wherein it was emphasized by the Court that if the initial onus of establishing the identity, genuineness, and creditworthiness of the source of unexplained investments is discharged by the assessee, the burden cannot automatically shift without positive evidence from the Assessing Officer. In cases lacking adequately proven sources, it is justifiable to treat these investments as income, taxable in the year they appear to have been made It is to be appreciated that the Sale deed is part of revenue records and part of the same cannot be simply brushed aside. The revenue cannot blow hot and cold in same breath at the same time. When the part of the sale deed is considered to be true about its execution leading to scrutiny, the other part is also required to be considered as true regarding the confirmation from both parties that payment being made from 1990 to 2012 and possession also being handed over to the purchaser assessee. The said facts are confirmed by seller party as they have undisputedly signed and executed the sale deed and 8
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Assessing Officer has not made any further inquiry with the sellers u/s: 133(6) or 131. It is well settled law that the Revenue cannot rely on part of documents and neglect the remaining part. The Revenue cannot pick and choose for the benefit of Department. The Assessing Officer has made addition solely on the basis of Sale Deed and hence, the said sale deed is to be relied in full and thus when the Sale deed dated 02.09.2016 clearly mentions that the payment for land is made from 1990 to 2012 which is also supported by Agreement to Sale cum possession dated 01.02.2012, and hence there is no question of making any additions in the year under consideration. Even otherwise, surprising, the Ld. CIT(A) while deciding the appeal has concluded that the addition is to be confirmed under Section 56(2)(vii)(c) r.w.s. 50C although the Assessing Officer has not made any reference of deeming provisions of Section 56(2)(vii)(c) in the assessment order means in a way the Ld. CIT(A) has accepted that Section 68 or Section 69 is not invokable because the deeming provisions of Section 68/69 and Section 56(2)(vii)(c) are mutually exclusive. The Department has not filed any CO against the findings of the Ld. CIT(A). It is contented that the provisions of Section 56(2)(vii)(c) is not applicable because the same relates to "other than immovable property and this is not the case of variation in Stamp duty value and purchase consideration as the Sale deed clearly mentions the Purchase consideration as Rs. 1,25,95,950/- and it was never the case of the Assessing Officer that the same is less than the Stamp duty Valuation
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The ld. D.R. relied upon the assessment order and the order of the CIT(A).
There is a delay of 220 days in filing the present appeal for which the assessee has filed the detailed affidavit stating the reasons therein. The reasons appear to be genuine, hence the delay is condoned.
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has given the details of purchase of property including that of sale deed which categorically mentions the payment of Rs. 1,25,95,950/- from 1990 to 2012 in cash installments. The assessee has very well submitted that the assessee has 70% of shares in the said purchase deed/property and from the perusal of records and the books of accounts along with bank statement, it appears that the assessee has given the details of cash deposits and has maintained books of accounts in accordance to that. From the perusal of the consideration clause of the sale deed, the details of payment in cash including the part payment on various dates is clearly mentioned. The Assessing Officer has not taken cognizance of the same. Once, the assessee has demonstrated that the payment was properly shown through its own sources, the said amount cannot be amount to unexplained cash credits u/s. 68 of the Act. Thus, the addition made by the Assessing Officer in respect of purchase in property is not
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justifiable. Ground nos. 2 and 3 are consequential, hence allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 06-04-2026
Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 06/04/2026 a.k आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Surat 6. Guard file. By order, Assistant Registrar, Income Tax Appellate Tribunal, Surat